Running head: EXERCISE 2
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Exercise Two
Liberty University
9/2015
BUSI 690
EXERCISE 2
2
Chapter 6
Discussion Question 1
What are some drawbacks and risks to a broad generic business strategy? To a focused
strategy?
There are several drawbacks to a broad generic business strategy. A broad strategy
embraces several services or products that may not be able to stand on its own in a business
industry. Having multiple products unable to compete in the marketplace against a competitor’s
product may hurt the company’s profits as the consumer may not understand one product from
the other because there is no differentiation. Looking at the cost to make the products, it may cost
more to make a broad range of products than it does to make one. The value of the company
may lessen if the market changes or consumer’s preferences shift allowing competitors to buy
out or take over the failing company.
A focus strategy concentrates one product or service to achieve cost advantage. This
allows a company to focus on one product or service and create a niche in the marketplace to
increase profits. Focus strategy relies on repeat customers and creating a product or service that
is able to differentiate itself from the competitors.
When a company focuses on one product they may create a lesser bargaining power with
their suppliers. However, if the company can create a product that the consumers needs and
competitors can’t compete with then, that cost can be passed down to the customers. If a product
can stand on its own in a niche market then a firm can broaden their focus on products that
support the narrow marketplace segment.
Discussion Question 4
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In Ch 4 we, discussed the internal value chain activities a firm can perform in its business
model. The value chain priorities can be quite different for firms taking different business
strategies. Create examples of value chains for three firms: one using cost leadership,
another using differentiation and a third using an integration business level strategy
A cost leadership strategy is a “generic business strategy that seeks to create the same or
similar value for customers by delivering products or services at a lower cost than competitors,
enabling the firm to offer lower prices to its customers” (Rothaermel, 2013). There are several
ways companies utilize this strategy that may reduce costs. An example of this can be found in
the technology. An organization may use computer programs to evaluate employees, online
training, process paperwork, etc. This reduces the amount of personnel that is takes to run a firm
and lowers overhead costs. Another use to reduce costs may be to purchase general stock items
online at a bulk price and create reports to show management over all costs for the month
regarding certain segments of the firm. Many companies have technology that controls
inventory to manage costs and to help reduce spending. This allows a company to become more
efficient which may reduce value chain costs of the firm. Using technology and offering
consumers a marketplace that is better than the competition one can improve on the company’s
process and make it more efficient and increase customer’s satisfaction.
Chapter 7
Discussion Question 1
Assume you work for a small firm that developed a better and faster operating system for
netbooks than Microsoft Windows, what strategy might the firm use to unseat Windows in
this market?
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As an employee of a company that has developed a faster and better operating system for
netbooks, it is significant to understand the ability to create a paradigm shift. Rothaermel
describes a paradigm shift as “a situation in which a new technology revolutionizes an existing
industry and eventually establishes itself as the new standard” (Rothaermel, 2013). When a
company discovers a product or service that is above the competition and a better value, a
paradigm shift can take effect within the marketplace. This change may be valuable to a firm by
combining a business-level strategy to provide excellent quality and low cost.
A strategy used to unseat Windows in this marketplace would be to continue creating
innovative products at a low cost. The firm should look at other ways to provide better products
and services within the industry and continue to build on the new operating system to maintain
their competitive advantage.
Discussion Question 2
How does the industry life cycle affect business strategy? Detail your answer based on each
stage: introduction, growth, maturity and decline.
Industry life cycle discusses “the four different stages – introduction, growth, maturity,
and decline – that occur in the evolution of an industry over time” (Rothaermel, 2013).
Depending on what life cycle stage an industry is within, a company may need to adjust their
strategy accordingly. An example would be to focus on what may attract new customers to a new
product in the introduction stage. Focusing on what product or service may appeal to a target
market would enhance a strategy. This means a company should highlight the need for a product
and create a necessity that a cusumer may want to buy. In the growth stage, it would be important
for a company to show how their product works and is a better value for the consumer. This
EXERCISE 2
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would show consumers that your product is above the competition. Making sure the company
has a focused strategy a company would be able to meet and possibly exceed their goals.
While in the maturity stage, a company may see a decrease in the innovation stage and
focus on strategy and cost leadership. This may increase sales as the consumer looks to purchase
a cost effective product. The final stage is the decline stage of the industry life cycle. This stage
profits decrease and new innovation may need to take place. At this stage it is important for an
organization to reduce costs to maintain their current market share. This is when a cost
leadership strategy or a integration business-level strategy should be reviewed or taken into
consideration to remain competitive within the industry.
Discussion Question 4
Why are standard important in many industries? As standard get adapted and become
dominant how does this process influence the competitive nature of the industry?
According to Rothaermel (2013), a standard is “an agreed upon solution about a
common set of engineering features and design choices; also known as dominant design” (p.
175). The development if standards are commonly developed within the growth stage of the
industry life cycle. Industry standards help to ensure products and services work as intended and
also helps to ensure customer safety. Additionally, industry standards help to ensure goods and
services are compatible with one another so they can be used with other goods and services.
When a company is able to be a forerunner in the development of an industry standard, they are
more likely to have a larger market share than other companies. As a result, the company’s goods
and service can become known as the standard by which competing companies’ goods and
services are compared to.
Standards are important in many industries as they are able to become the market leader
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for that industry. Not only will standards affect their own industry but other industries as well. As
standards get adapted and become dominant, this process influences the way the industry attracts
new customers.
Chapter 8
Discussion Question 1
When Walmart decided to incorporate grocery stores into some locations and created
“Super-centers”, was this a business level strategy of differentiation or a corporate level
strategy of diversification? Why? Explain?
Business-level strategy of differentiation is “the quest for gaining and sustaining
competitive advantage in a single product market” (Rothaermel, 2013). A corporate-level
strategy refers to “the decisions that senior management makes and the actions it takes in the
quest for competitive advantage in several industries and markets simultaneously” (Rothaermel
2013). Walmart’s decision to integrate grocery stores into some locations called them
“supercenters” was a great display of corporate level strategy of diversification.
Walmart looked for areas in the marketplace to compete with retail and grocery stores in
small town communities. Not finding a large degree of competition Walmart’s senior
management chose to combine grocery and retail into one store. By combining a grocery store
to a Walmart retail store, sales would increase and provide innovation for new customers. By
using marketplace strategy, customers would brose the store and purchase additional items not
originally on the consumer’s list. This horizontal line of integration would increase products and
services to customers.
Chapter 9
Discussion Question 1
EXERCISE 2
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Horizontal integration has benefits to the firms involved. Consider the
consolidation in the event promotion business when Live Nation bought Ticketmaster in
2010. List some spceifica advantage of this acquition for Live Nation. Do you see any
downside to the merger?
Horizontal integration is when a company merges with their competitors. Rothaermel
says it’s “the process of acquiring and merging with competitors, leading to industry
consolidation” (Rothaermel, 2013). Several benefits to integration are that it may reduce costs,
increase market power or market share. This may also reduce the amount of competition within
the market or allow access to new consumers. In most cases, mergers have not been known to
create a competitive advantage for a company, and may “destroy shareholder value” being a
significant downside to a merger (Rothaermel, 2013).
Chapter 10
Discussion Question 1
Multinational enterprises have an impact far beyond their firm boundaries. Assume you
are working for a small firm that supplies a product or service4 to an MNE. How might
your relationship change as the MCE moves from Globalization 2.0 to 3.0 operations?
Globalization is collaboration among countries around the world. Globalization 2.0 lasted
from 1800 to 2000, during this time, multinational enterprises (MNEs) “began to create smaller
self-contained copies of themselves, with all business functions intact, in a few key countries”
(Rothaermel, 2013). Whereas, globalization 3.0, our current stage of globalization, where MNEs
are able to “freely locate business functions anywhere in the world based on an optimal mix of
costs, capabilities, and PESTEL factors” (Rothaermel, 2013).
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As a company seeks to transition from Globalization 2.0 to 3.0 it is important to look at
communication and technology. As a small company making the change from 2.0 to 3.0 staying
competitive would be the key to success. Building a relationship and understanding the market
changes would encourage market delivery of products and services. This in turn would create a
solid supply chain to keep costs low and continue growth. It is important for a small company to
provide both a high quality product or service at a competitive rate to build a relationship with
the MNE.
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References
Rothaermel, F. (2013). Strategic Management Concepts and Cases. New York, NY:
McGraw-Hill.
